Nick Cola Corporation produces a new soft drink brand, Sweet Spring, using two production departments: mixing and bottling. Nick’s beginning balances and data pertinent to the mixing department’s activities for 2014 follow.
Accounts Beginning Balances
Cash ................. $ 50,000
Raw materials inventory ......... 14,800
Production supplies ........... 100
Work in process inventory (400,000 units) .. 48,000
Common stock ............. $112,900
1. Nick Cola issued additional common stock for $80,000 cash.
2. The company purchased raw materials and production supplies for $29,600 and $800, respectively, in cash.
3. The company issued $32,360 of raw materials to the mixing department for the production of 800,000 units of Sweet Spring that were started in 2014. A unit of soft drink is the amount needed to fill a bottle.
4. The mixing department used 2,400 hours of labor during 2014, consisting of 2,200 hours for direct labor and 200 hours for indirect labor. The average wage was $9.60 per hour. All wages were paid in 2014 in cash.
5. The predetermined overhead rate was $1.60 per direct labor hour.
6. Actual overhead costs other than indirect materials and indirect labor for the year amounted to $1,260, which was paid in cash.
7. The mixing department completed 600,000 units of Sweet Spring. The remaining inventory was 25 percent complete.
8. The completed soft drink was transferred to the bottling department.
9. The ending balance in the Production Supplies account was $560.
a. Determine the number of equivalent units of production.
b. Determine the product cost per equivalent unit.
c. Allocate the total cost between the ending work in process inventory and units transferred to the bottling department.
d. Record the transactions in T-accounts.